If you are a contractor working with an agency of U.S. Government you've almost surely dealt with FAR, or Federal Acquisition Regulation. The lengthy legal document provides the rules and regulations that government agencies and prime contractors must follow when working with each other.

In this article, we'll detail a particular section which focuses on a key element in any negotiations between Government and prime contractor: the documentation of the negotiations.

Since the responsibility for proper spending of Government funds is on the prime contractor and the contractor's responsibility, it's essential to be precise and thorough when capturing negotiations.

Any discrepancies might be caught in a Contractor Purchase System Review, or a CPSR. This review process ensures that the principal contractor is using taxpayer money in a responsible manner.

Utilizing this article, you'll be able create a complete document of negotiation that is compliant with FAR 15.406-3 this is crucial for contracting officers who are charged with taking and submitting all required information to the contract file.

What does each price-negotiating memorandum contain?
In total, the document discussed throughout this post is referred to as a price Negotiation Memorandum, or PNM for short. In FAR 15.406-3, the PNM is composed of eleven principal elements:

Section 1
This section is relatively simple, since it simply clarifies the intent of the negotiation. The reasons for negotiation may differ and include negotiation of a new contract on an sole source basis or the negotiation of an equitable adjustment as well as other such. They are first determined during the prenegotiation objectives phase, which is defined by FAR 15.406-1.

Section 2
The description should be of the acquisition itself that may comprise things, services or construction or even real property that the Government is planning to acquire. Include all identified numbers. "Identifying numbers" includes things like"RFP (Request for Proposal) numbers that relate on the precise proposal document for what the contractor has to offer.

Section 3
This section must include the name, title and organization of every person who represents an individual contractor, as well as the Government in the negotiations.

Section 4
In this part, we will discuss the state of affairs of all contractor systems that relate to negotiations. This might include accounting, buying, estimating or compensation. The section should be specific about how these systems related to the negotiation and how they were taken into consideration.

What portion of FAR refers to contract pricing?
The two following sections are kind of connected to each other, and so we'll start by looking at the document that they refer to. When a principal contractor sends bids, they usually include an estimate of the amount of work to cost i.e. a pricing proposal. If we refer back to the example of construction, the basic cost elements would be an estimate of click here labour and materials on a specific task. In this instance it is the FAR contains a specific document specifically for this purpose referred to by the name of Certificate of Current Cost or Pricing Data.

In FAR 15.406-2 you can locate an example of the document that contains the name of the firm and lines for your personal name, title, signature, and the date you signed. This certificate affirms that, from your knowledge, the cost estimate that you've submitted is correct. Also, this certificate is only valid for prime contracts exceeding $2 million , which were granted on or on or after July 1, 2018. Let's look at the specific guidelines that govern this document:

Section 5
This section focuses on instances where the certificate of current cost or pricing data was not required to determine acceptable contract costs even though the contract granted exceeded the $2 million threshold. FAR 15.403-1 defines the scenarios where the certificate of current cost or pricing data isn't needed, however a few of them are:

When the contracting officer determines that the prices agreed on are basing on the prices set by regulation or law

When a commercial item or commercial service is being acquired

In the event of modifying any contract or subcontract for commercial products or services

The the FAR 15.403-1 for the full list of requirements, however, If your contract does not need a proof of current pricing or cost information, Section 5 has to specify the particular exception which lets you skip the certificate , and what basis your contract falls within that exception.